Wikipedia traces the etymology of the word “wealth” thus:

Wealth derives from the old English word “weal”, which means “well-being” or “welfare”. The term was originally an adjective to describe the possession of such qualities.

These days, we tend to think of “wealth” as the sort of ostentatious riches normally possessed in eye-popping quantities by government bigshots from kings to Kennedys, but I’ll be using it in its original sense as stuff that contributes to one’s well-being. This presumably includes things like Bentleys*, thoroughbreds, and movie-star mistresses, but also includes clean water, hygenic sewage systems, access to emergency medicine, and even beer, cable, and Twinkies.  The biggest problems concerning wealth, as most people will tell you, are (first) that they don’t have enough of it, and (second) that some other guy has too much.

The first issue is understandable.  It derives from self-interest, which (as I keep having to reiterate) isn’t intrinsically good or bad.  The “I want more wealth” impulse probably derives from the same sort of evolved instincts that make us crave sweet things.  Fifty thousand years ago, having more stuff — more meat, more nuts and berries, more furs, more stone axes and arrowheads — meant a better chance for survival and more and better opportunities to mate.  Unlike the sugar-seeking instinct, this one isn’t entirely obsolete: more wealth equates to more and healthier food, better opportunities for education, and generally a longer, happier, more productive life.

The second point is where things get irritatingly complex, and where well-meaning people fuck things up for everyone.

From a purely quantitative perspective, wealth inequality (or income inequality, as it’s usually simplified) shouldn’t be relevant.  Wealth isn’t zero-sum — if you have more, it doesn’t follow that there’s less for me — so I should be more concerned with how my wealth changes over time than with how my wealth compares to yours.  If I can afford more grass-fed beef and boutique microbrew this year than I could last year, it’s simply mean-spirited for me to complain that you can afford to trade in your five-year-old Corolla for a new Mercedes E-class.  Isn’t it?

Not necessarily.  We’re still burdened with those evolved impulses to measure wealth as though we were small-band hunter-gatherers (or, more generically, pack predators), and when those instincts fire the mere idea that someone else has much more wealth than we do rubs us very much the wrong way.  Probably most importantly, mate selection evolved to favour men with lots of wealth**.  (Yes, there is a kernel of truth behind the stereotype of the ostentatiously rich playboy who gets lots of action, and behind that of the mid-life crisis sufferer trying way too hard to be mistaken for one.)  Wealth in modern society may not be a zero-sum game, but mate selection in a small tribal society surely was — so our instincts are telling us that if that rich bastard gets laid, we’re gonna be sleeping alone.  (On the distaff side of the equation, I imagine that the same instinct tells a woman whose partner isn’t rich that her offspring — thus, her genes — are at a disadvantage.  Alas, I haven’t seen anything in the way of research on this topic.)

Couple the potent combination of fucking and genetic survival with a heaping helping of self-interest and a well-popularized fairy-tale interpretation of causation — if something bad happens, it must’ve been caused by a villain — and you have the motivations behind wealth redistribution.***  You also have the beginnings of a moral justification for what seems, in a purely rational world, to be fundamentally immoral: by some degree of wealth redistribution, you can (claim to) help compensate for a basic and largely unavoidable source of irrational behaviour in humans.  (Seems like there should be some connection between this issue and the notion of external costs.)

Of course, I only care about this because I’m a nerd.  Most people aren’t nerds, and their interest in wealth redistribution is either to acquire more wealth at the expense of others and punish those with more shit than they, or to oppose the same under the not unreasonable grounds that taking stuff at gunpoint from people is a Nasty Thing To Do.

Beyond that, when we talk about things like income inequality, we tend to assume that the figures being cited generally “mean what they say” — that they aren’t misleading — and argue instead about stuff like morality (as I’ve done above).  Unfortunately, this simply isn’t the case.

• Pietro Poggi-Corradini on Inequality (Cafe Hayek)

Dr. Poggi-Corradini provides the following counterexample (there’s more in the original link):

A society at the beginning consists of 10 individuals, 9 of which make 1 dollar and 1 who makes 10 dollars. Social scientists decide to keep track of the top 20%. So the top 20% makes an average of 5.5 dollars while the bottom 80% makes an average of 1 dollar. Now suppose that after 1 year there are now 8 people making 1 dollar and 2 people making 10 dollars. The top 20% now makes an average of 10 dollars. Dividing 4.5 by 5.5 this represents an 82% increase for the top quintile. The bottom 80%  on the other hand sees a 0% increase in income. One would like to conclude that “inequality has risen”.

In other words, if more people join the top-quintile “upper class”, this statistical indicator will show that inequality has increased, rather than decreased.  Not quite what we had in mind!  (There are plenty of arguments in the comments over the details of the example, some of which boil down to inconsequential nit-picking, and others of which touch on stuff I’ve mentioned above.  Cafe Hayek’s comments tend to be a pretty good read.)

We also tend to assume, when we’re talking about wealth redistribution, that since we’re not actually taking anything away from the system as a whole — just moving it from one person/place/thing to another — we’re leaving the total amount of wealth constant.  That ain’t necessarily so:

• Flaherty vows not to shut out Ontario as feds curb equalization (Globe and Mail)

(Equalization payments are one of Canada’s more blatant wealth-redistribution schemes.  Basically, the Federal Government plays Robin Hood: they take money from “have” provinces and give (some of) it to “have-not” provinces.  If that sounds like punishing success and rewarding failure to you, you probably live west of Manitoba.  It’s also a great way to promote animosity between regions and provinces — above and beyond football and hockey season.)

Mostly, the Globe’s story focuses on the fact that Ontario — normally one of the “have” provinces and a grudging contributor of funds to places that have better hockey teams — is on the verge of slipping below the “have-not” threshold, and is looking forward to getting free shit from British Columbia, Alberta, and Saskatchewan.  Much to Ontario’s chagrin, however, the Feds are planning to cut back on equalization payments.  (The Toronto-based Globe, to their credit, put together a midly objective comment on the subject.)

“After paying over $100-billion over five decades to the rest of Canada through equalization and not getting a penny in return, Ontarians should be more than a little skeptical of the latest noises coming from Ottawa,” a provincial official said.

The more interesting part, though, is Flaherty’s reasoning behind the equalization cuts:

“The reality is that the growth in equalization payments . . . is about 15 per cent per year and given what is happening in the world today, including in Canada, that is not sustainable. We could continue on that path, and we would run deficits and the equalization program would go bankrupt.”

Mr. Flaherty said the unsustainable increases are due primarily to “unprecedented volatility” in natural resource prices.

[...]

Because payments are based on a three-year average with a two-year time lag, Flaherty said the federal government could wind up “paying equalization on the basis of $140 per barrel oil at a time when, as you know, the price of oil is in the sixties.”

(This could also be read as “Why should we support you Liberal-voting assholes when Alberta votes nearly a solid Conservative ticket?”  Isn’t it wonderful to have a strong central government?)

Yeah.  Apparently, wealth-redistribution schemes based on rigid centrally-managed bureaucracies aren’t all that great at adapting to changing circumstances, and drag down the economy as a whole.  Whoever would have thought?

——

* I will admit to lusting after one particular model of Bentley, but it’d make a pretty impractical daily driver.

** Rather than get into it here, I’ll refer the interested reader to Chapters 3 and 4 of David Buss’s The Murderer Next Door.  The really short version is that, back when we evolved these instincts, men with more wealth were far better able to provide for a woman while she was pregnant or raising a child, so women who preferred “wealthy” men had a better chance of passing on their genes.

*** Well, no, you don’t.  You have the foundation of my hypothesis explaining the motivations behind wealth distribution.  Let’s not pretend that I’m telling the capital-T Truth about The Way Things Are, or even that I think I’m doing so.